Publication 550: Investment Income and Expenses; Index

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

A

Accounting fees, Attorney or accounting fees.

Accrual method, Accrual method taxpayers., Accrual method., When To Report Investment Expenses

Accuracy-related penalty, Accuracy-related penalty., Accuracy-related penalties.

Acquisition discount, Government obligations., Acquisition discount on short-term obligations., Short-term government obligations.

Acquisition premium, Acquisition premium.

Adjusted basis, Adjusted Basis

Alaska Permanent Fund dividends, Alaska Permanent Fund dividends., Investment income., Child's Alaska Permanent Fund dividends.

Amortization of bond premium, Bond Premium Amortization

Annuities:

Borrowing on, Borrowing on insurance.
Bought with life insurance proceeds, Annuity.
Interest on, Interest on annuity contract., Sale of Annuity
Nontaxable trades, Insurance Policies and Annuities
Sale of, Sale of Annuity
Single-premium, Single-premium life insurance, endowment, and annuity contracts.
Trade for, Trade of investment property for an annuity.

Appreciated financial position, Constructive Sales of Appreciated Financial Positions

Assistance (see Tax help)

At-risk rules, At-risk rules., At-risk rules.

Attorney fees, Attorney or accounting fees.

Automatic investment service, Automatic investment service and dividend reinvestment plans., Automatic investment service., Automatic investment service.

B

Backup withholding, Backup withholding.

Bad debts, Nonbusiness Bad Debts

Bargain purchases, Bargain purchases.

Basis:

Adjusted, Adjusted Basis
Cost, Cost Basis
Discounted debt instruments, Original issue discount (OID) on debt instruments.
Investment property, Basis of Investment Property
Other than cost, Basis Other Than Cost
Real estate investment trust (REIT), Basis adjustment.
REMIC, residual interest, Basis in the residual interest.
Stocks and bonds, Basis adjustment., Basis adjustment., Basis., Stocks and Bonds

Bearer obligations, Bearer CDs., Bearer Obligations

Bonds:

Accrued interest on, Accrued interest on bonds.
Amortization of premium, Bond Premium Amortization
Arbitrage, Arbitrage bonds.
Basis, Stocks and Bonds
Capital asset, Stocks, stock rights, and bonds.
Convertible, Convertible stocks and bonds.
Coupon, Coupon bonds.
Coupons, stripped, Stripped Bonds and Coupons
Federally guaranteed, Federally guaranteed bonds.
Market discount, Market discount., Market Discount Bonds, Market discount on bonds., Market discount bonds., Market discount bonds.
Mortgage revenue, Mortgage revenue bonds.
New York Liberty, New York Liberty bonds.
Premiums on, Premiums on bonds.
Private activity, Private activity bonds.
Redemption or retirement of, Redemption or retirement of bonds.
Registered, Registration requirement., Obligations required to be in registered form.
Sold between interest dates, Bonds Sold Between Interest Dates
State and local, Tax-exempt state and local government bonds.
State or local government, State or Local Government Obligations
Stripped, Stripped bonds or coupons., Stripped Bonds and Coupons
Traded flat, Bonds traded flat.
U.S. savings, U.S. Savings Bonds, U.S. savings bond interest previously reported.
U.S. Treasury, Treasury notes and bonds., U.S. Treasury Notes or Bonds, U.S. Treasury notes and bonds.

Brokerage fees, Fees to buy or sell.

C

Calls and puts, Calls and Puts

Capital assets, Capital Assets and Noncapital Assets

Capital gain distributions, Capital Gain Distributions, Capital gain distributions., Choosing to include net capital gain.

Capital gain tax computation, Capital Gain Tax Rates

Capital gains and losses:

Constructive ownership transactions, Gains From Certain Constructive Ownership Transactions
Investment property, Investment property.
Long term, Long-term or short-term., Long-term gains and losses.
Losses, limit on, Capital Losses
Reporting, Reporting Capital Gains and Losses
Short term, Long-term or short-term., Short-term gains and losses.

Capital loss carryover, Capital loss carryover.

Cash method, Cash method taxpayers., Cash method., When To Report Investment Expenses

Certificate of deposit, Certificates of Deposit (CDs)

Children:

Gifts to, Income from property given to a child.
Investment income of, Tax on investment income of a child under age 14.
Owner of U.S. savings bond, Child as only owner.
Related parties, Losses on Sales or Trades of Property

Clerical help, Clerical help and office rent.

Collateralized debt obligations (CDOs), REMICs, FASITs, and Other CDOs, Collateralized Debt Obligations (CDOs)

Comments, Comments and suggestions.

Commissions, trustee's, Trustee's commissions for revocable trust.

Commodity futures, Commodity Futures, Commodity futures.

Community property, Community property.

Constructive ownership transactions, Gains From Certain Constructive Ownership Transactions

Constructive receipt, Constructive receipt.

Constructive sales, Constructive Sales of Appreciated Financial Positions

Conversion transactions, Conversion Transactions

Convertible stocks and bonds, Convertible stocks and bonds.

Corporate distributions:

Capital gain, Capital Gain Distributions
Dividends, Dividends and Other Corporate Distributions
Liquidating, Liquidating distributions., Investment property received in liquidation.
Nontaxable, Nontaxable Distributions
Return of capital, Return of Capital
Stock rights, Distributions of Stock and Stock Rights, Stock rights.
Undistributed capital gains, Undistributed capital gains of mutual funds and REITs.

Cost basis, Cost Basis

D

Day traders, Special Rules for Traders in Securities

Decedents, Decedents., Transfer by inheritance., Decedent's capital loss.

Demutualization, Demutualization of Life Insurance Companies

Deposits, loss on, Deposit in Insolvent or Bankrupt Financial Institution

Discount on debt instruments:

Market discount, Market discount., Market Discount Bonds, Market discount on bonds., Market discount bonds., Market discount bonds.
Original issue discount (OID), Original issue discount., Original Issue Discount (OID)
Sales or redemptions, Discounted Debt Instruments
Short-term obligations, Discount on Short-Term Obligations
Stripped bonds and coupons, Stripped Bonds and Coupons

Dividend reinvestment plan, Dividends used to buy more stock., Automatic investment service and dividend reinvestment plans., Dividend reinvestment plans.

Dividends:

Exempt-interest, Other Distributions
Extraordinary, Extraordinary dividends.
Form 1099–DIV, Form 1099–DIV.
How to report, How To Report Dividend Income
Incorrect Form 1099, Incorrect amount shown on a Form 1099.
Insurance policies, Dividends on insurance policies.
Nominees, Nominees.
On restricted stock, Dividends received on restricted stock.
On stock sold, Dividends on stock sold.
Ordinary, Ordinary Dividends
Patronage, Patronage dividends.
Payments in lieu of, Payments in lieu of dividends
Received in January, Dividends received in January.
Reinvestment plans, Dividends used to buy more stock., Automatic investment service and dividend reinvestment plans., Dividend reinvestment plans.
Scrip, Scrip dividends.
Stock, Stock dividends., Stock dividends.
Vs. sale or trade, Dividend versus sale or trade.

Divorce, Transfers Between Spouses

E

Education Savings Bond Program, Education Savings Bond Program
Employee stock ownership plan, Stock sold to, Sales of Stock to ESOPs or Certain Cooperatives
Empowerment zone, Rollover of Gain From Sale of Empowerment Zone Assets
Endowment contract, Face-Amount Certificates, Single-premium life insurance, endowment, and annuity contracts.
Estate income received by beneficiary, Beneficiary of an estate or trust.
Expenses of producing income, Expenses of Producing Income

F

Face-amount certificates, Face-Amount Certificates

Fair market value, Fair market value., Fair market value.

Federal guarantee on bonds, Federally guaranteed bonds.

Fees to buy or sell, Fees to buy or sell.

Financial asset securitization investment trust (FASIT), FASITs

Foreign currency transactions, Foreign currency contract., Position.

Foreign income, Important Reminders

Form:

1041, Club files Form 1041.
1065, Club files Form 1065.
1066 (Schedule Q), Schedule Q., Investment expenses from pass-through entities.
1096, File Form 1099–INT with the IRS., File Form 1099–DIV with the IRS.
1099–B, Form 1099–B., Form 1099–B transactions.
1099–DIV, Form 1099–DIV., Form 1099–DIV.
1099–INT, Form 1099–INT., Form 1099–INT for U.S. savings bond interest., Form 1099–INT., Forms 1099–INT and 1099–OID., Forms 1099–INT and 1099–OID.
1099–MISC, Form 1099–MISC., Reporting Substitute Payments
1099–OID, Form 1099–OID, Form 1099–OID., Forms 1099–INT and 1099–OID., Forms 1099–INT and 1099–OID.
1099–S, Form 1099–S transactions.
1116, Form 1099–INT.
1120, Club files Form 1120.
1120-A, Club files Form 1120.
2439, Undistributed capital gains of mutual funds and REITs.
3115, Change from method 2.
4684, Deposit in Insolvent or Bankrupt Financial Institution
4797, How to report.
4952, Form 4952, When To Report Investment Expenses
6198, At-risk rules.
6781, Form 6781., How To Report Gains and Losses (Form 6781)
8271, Investor Reporting
8275, Negligence or disregard of rules or regulations.
8275–R, Negligence or disregard of rules or regulations.
8582, Form 8582., Passive activity losses., Passive activity gains and losses.
8615, Tax on investment income of a child under age 14.
8814, Tax on investment income of a child under age 14., Investment income of child reported on parent's return.
8815, Form 8815., Interest excluded under the Education Savings Bond Program.
8818, Education Savings Bond Program
8824, How to report.
8832, Clubs formed before 1997.
SS–4, Identifying number.
W–8BEN, Nonresident aliens.
W–9, Certification.

Fractional shares, Fractional shares., Automatic investment service.

Free tax services, How To Get Tax Help

Frozen deposits, Interest income on frozen deposits., Frozen deposits.

Futures contract, regulated, Regulated futures contract.

G

Gains and losses:

Deposits, Deposit in Insolvent or Bankrupt Financial Institution

Gains on sales or trades, How To Figure Gain or Loss, Gain on Sale or Trade of Depreciable Property

Gifts, Property Received as a Gift, Property received as a gift., Loan or gift.

Glossary, Glossary

H

Hedging transactions, Hedging Transactions, Hedging transaction.

Help (see Tax help)

Holding period:

Investment property, Holding Period
Straddles, Holding Period and Loss Treatment Rules

How to report:

Bond premium amortization, How To Report Amortization
Capital gains and losses, Reporting Capital Gains and Losses
Dividend income, How To Report Dividend Income
Interest income, How To Report Interest Income
Investment expenses, How To Report Investment Expenses
Nonbusiness bad debts, How to report bad debts.
Positions, How To Report Gains and Losses (Form 6781)
Rollover of gain, How to report and postpone gain., How to report gain.
S corporation income, etc., Reporting S corporation income, deductions, and credits.
Sales of SBIC stock, How to report.
Section 1256 contracts and straddles, How To Report
Wash sales, How to report.

I

Income from sources outside the U.S., Important Reminders

Indian tribal government, Indian tribal government.

Inherited property:

Basis of, Property Received as Inheritance
Holding period, Inherited property.

Installment sales, Installment sale payments., Installment sales.

Insurance:

Borrowing on, Borrowing on insurance.
Dividends on, Dividends on insurance policies.
Dividends, interest on, Interest on insurance dividends.
Interest option on, Interest option on insurance.
Life, interest on loan to buy, Single-premium life insurance, endowment, and annuity contracts.
Life, paid to beneficiary, Insurance
Prepaid premiums, Prepaid insurance premiums.
Single-premium life, Single-premium life insurance, endowment, and annuity contracts.
Trades, Insurance Policies and Annuities

Interest expenses:

Allocation, Allocation of Interest Expense
Carry forward, Limit on Deduction
Investment, Investment Interest
Limit on investment interest, Limit on Deduction
Margin accounts, Interest on margin accounts.
Mixed straddle account positions, Interest expense and carrying charges relating to mixed straddle account positions.
Paid in advance, Interest paid in advance.
Passive activity losses, Losses from passive activities.
Straddles, Interest expense and carrying charges on straddles.
Unstated, Unstated interest.

Interest income:

Frozen deposits, Interest income on frozen deposits., Frozen deposits.
How to report, How To Report Interest Income
In general, Interest Income
On condemnation award, Interest on condemnation award.
On insurance dividends, Interest on insurance dividends.
On seller-financed mortgage, Interest on seller-financed mortgage.
On tax refund, Interest on tax refunds.
Tax-exempt, Tax-Exempt Interest
Taxable, Taxable Interest — General
Usurious, Usurious interest.
When to report, When To Report Interest Income

Investment clubs, Investment Clubs

Investment expenses:

Deductible, Expenses of Producing Income
From pass-through entities, Investment expenses from pass-through entities.
How to report, How To Report Investment Expenses
Interest, Investment Interest
Limits on deductions, Limits on Deductions
Nondeductible, Nondeductible Expenses

Investment income, Investment Income

Investment income, children, Tax on investment income of a child under age 14.

Investment property:

Basis, Basis of Investment Property
Defined, Investment property.
Gain or loss treatment, Investment property.
Sales and trades, Sales and Trades of Investment Property

IRAs, Individual retirement arrangements (IRAs).

J

Joint accounts, Joint accounts.

L

Life insurance companies, demutualization, Demutualization of Life Insurance Companies

Like-kind exchanges, Like-Kind Exchanges, Like-Kind Exchanges

Liquidating distributions, Liquidating distributions., Liquidating distributions., Investment property received in liquidation.

Loans:

Below-market, Below-Market Loans
Gift and demand, Gift and demand loans.
Guarantees, Loan guarantees.
Nonbusiness bad debt, Loan or gift.
Term, Term loans.

Long-term capital gains and losses, Long-term gains and losses., Capital Losses

Loss on deposits, Deposit in Insolvent or Bankrupt Financial Institution

Losses on sales or trades:

How to figure, How To Figure Gain or Loss
Passive activities, Curbing Abusive Tax Shelters, Passive activity losses and credits., Losses from passive activities.
Related parties, Losses on Sales or Trades of Property
Small business investment company stock, Losses on Small Business Investment Company Stock
Small business stock, Losses on Section 1244 (Small Business) Stock
Wash sales, Wash Sales

M

Mark-to-market election, How To Make the Mark-to-Market Election

Marked to market, Section 1256 Contracts Marked to Market, Marked to Market Rules, Traders in section 1256 contracts.

Market discount bonds, Market discount., Market Discount Bonds, Market discount on bonds., Market discount bonds., Market discount bonds.

Maximum tax rate, net capital gain, Capital Gain Tax Rates

Meetings, expenses of attending, Stockholders' meetings.

Money market certificates, Money market certificates, savings certificates, and other deferred interest accounts.

Money market funds, Money market funds.

More information (see Tax help)

Mortgage:

Revenue bonds, Mortgage revenue bonds.
Secondary liability on home, Secondary liability on home mortgage.
Seller-financed, Interest on seller-financed mortgage.

Municipal bonds, State or Local Government Obligations

Mutual funds, Dividends received in January., Undistributed capital gains of mutual funds and REITs., Including mutual fund or REMIC expenses in income., Publicly-offered mutual funds., Shares in a mutual fund or REIT., Loss on mutual fund or REIT stock held 6 months or less.

N

Nominee distributions:

Dividends, Nominees., Nominees.
Interest, Nominees., Nominee distributions.
Original issue discount, Nominee.

Nonbusiness bad debts, Nonbusiness Bad Debts

Noncapital assets, Capital Assets and Noncapital Assets

Nondeductible investment expenses, Nondeductible Expenses

Nonqualified preferred stock, Nonqualified preferred stock.

Nontaxable corporate distributions, Nontaxable Distributions, Nontaxable (return of capital) distributions.

Nontaxable trades, Nontaxable Trades, Nontaxable trades.

Notes:

Of individuals, bought at discount, Notes of individuals.
Redemption or retirement of, Redemption or retirement of bonds.
U.S. Treasury, Treasury notes and bonds., U.S. Treasury Notes or Bonds, U.S. Treasury notes and bonds.

O

Office expenses, Clerical help and office rent.

Options:

Calls and puts, Calls and Puts
Cash settlement, Cash settlement option.
Dealer equity, Dealer equity option.
Deep-in-the-money, Qualified covered call options and optioned stock.
Gain or loss, Options
Holding period, Option exercised.
Nonequity, Nonequity option.
Qualified covered call, Qualified covered call options and optioned stock.
Section 1256 contracts, Section 1256 contract options.
Wash sales, Options and futures contracts.

Ordinary gains and losses, Capital Gains and Losses

Original issue discount (OID), Original issue discount., Original Issue Discount (OID), Original issue discount (OID) adjustment., Original issue discount (OID) on debt instruments.

P

Passive activity, Passive activity losses., Passive activity losses., Curbing Abusive Tax Shelters, Passive activity losses and credits., Losses from passive activities., Passive activity gains and losses.

Penalty:

Accuracy-related, Accuracy-related penalty., Accuracy-related penalties.
Backup withholding, Penalties.
Failure to pay tax, Failure to pay tax.
Failure to supply SSN, Penalty for failure to supply SSN.
On early withdrawals, Interest subject to penalty for early withdrawal., Penalty on early withdrawal of savings.
Substantial understatement, Substantial understatement of tax.
Valuation misstatement, Valuation misstatement.

Portfolio income, Other income (nonpassive income).

Position:

Appreciated financial, Constructive Sales of Appreciated Financial Positions
Defined, Position.
Holding period, Holding Period and Loss Treatment Rules
Offsetting, Offsetting position.
Successor, Successor position.

Preferred stock:

Nonqualified, Nonqualified preferred stock.
Redemption premium, Preferred stock redeemable at a premium.
Stripped, Stripped Preferred Stock

Premiums on bonds, Bond Premium Amortization, Premiums on bonds.

Public utility stock reinvestment, Public utilities.

Publications (see Tax help)

Puts and calls, Calls and Puts

Q

Qualified 5–year gain, Qualified 5-year gain.
Qualified small business stock, Gains on Qualified Small Business Stock

R

Real estate investment trust (REIT), Dividends received in January., Basis adjustment., Shares in a mutual fund or REIT., Loss on mutual fund or REIT stock held 6 months or less.

Real estate mortgage investment conduits (REMICs):

Regular interest, Regular Interest
Residual interest, Residual Interest, Residual Interests in a REMIC.

Recordkeeping, General Information, Education Savings Bond Program, Property Received From Your Spouse, Losses on Section 1244 (Small Business) Stock

Registration of bonds, Registration requirement., Obligations required to be in registered form.

Regulated futures contract, Regulated futures contract.

Repossession of real property, Real property repossessed.

Rollover of gain from sale of securities, Rollover of Gain From Publicly Traded Securities

S

S corporations, S Corporations

Safe deposit box, Safe deposit box rent.

Sales and trades of investment property, Sales and Trades of Investment Property

Savings bonds, U.S. Savings Bonds, U.S. savings bond interest previously reported.

Scrip dividends, Scrip dividends.

Section 1202 gain, Gain on qualified small business stock.

Section 1244 stock, Losses on Section 1244 (Small Business) Stock, Section 1244 (small business) stock.

Section 1256 contracts, Section 1256 Contracts Marked to Market, Section 1256 contracts., Examples of non-dealer transactions., Section 1256 contracts and straddles.

Securities futures contracts, Securities Futures Contracts

Securities:

Holding period, Securities traded on an established market.
Installment sale, Installment sales.
Lost, stolen, etc., cost of replacing, Cost of replacing missing securities.
Rollover of gain from sale, Rollover of Gain From Publicly Traded Securities
Worthless, Worthless Securities, Losses on Section 1244 (Small Business) Stock, Worthless securities.

Self-employment, No social security coverage for investment club earnings., Self-Employment Income

Seller-financed mortgage, Interest on seller-financed mortgage.

Short sales:

Adjusted basis, Short sales.
Defined, Short Sales
Expenses of, Short-sale expenses.
Extraordinary dividends, Extraordinary dividends.
Puts, Put option as short sale.
SBIC stock, Short sale.
Substitute payments, Reporting Substitute Payments
Wash sales, Short sales.

Short-term capital gains and losses, Short-term gains and losses., Capital Losses

Short-term obligations, Discount on Short-Term Obligations

Sixty/forty rule, 60/40 rule.

Small business investment company stock, Losses on Small Business Investment Company Stock, Amount of gain recognized.

Small business stock, Losses on Section 1244 (Small Business) Stock, Qualified small business stock., Gains on Qualified Small Business Stock

Social security:

Investment club earnings, No social security coverage for investment club earnings.
Number, Social security number (SSN).

Specialized small business investment company, Amount of gain recognized.

Spouses:

Related parties, Losses on Sales or Trades of Property
Transfers between, Property Received From Your Spouse, Transfers Between Spouses

State or local government obligations, State or Local Government Obligations

Stock:

Basis, Basis adjustment., Stocks and Bonds
Capital asset, Stocks, stock rights, and bonds.
Constructive ownership, Constructive ownership of stock.
Convertible, Convertible stocks and bonds.
Dividends, Distributions of Stock and Stock Rights, Stock dividends.
Fractional shares, Fractional shares., Automatic investment service.
Identification, Adequate identification.
Installment sale, Installment sales.
Nonqualified preferred, Nonqualified preferred stock.
Public utility, reinvestment, Public utilities.
Qualified small business, Gains on Qualified Small Business Stock
Redemption of, Redemption of stock.
Rights, Distributions of Stock and Stock Rights, Stock rights., Stocks, stock rights, and bonds., Nontaxable stock rights.
Rollover of gain from sale, Rollover of Gain From Publicly Traded Securities
S corporation, S corporation stock.
Section 1202, Section 1202 Exclusion
Small business (section 1244), Losses on Section 1244 (Small Business) Stock
Small Business Investment Company, Losses on Small Business Investment Company Stock, Amount of gain recognized.
Sold or traded, Stocks and Bonds
Splits, Stock splits.
Straddle rules, Straddle rules for stock.
Stripped preferred, Stripped Preferred Stock
Surrender of, Surrender of stock.
Trades, Corporate Stocks

Straddles:

Deferral of loss from, Straddles
Identified, Identified straddle.
Interest expense and carrying charges, Interest expense and carrying charges on straddles.
Mixed, Mixed straddles., Mixed straddles., Mixed Straddles
Reporting, Section 1256 contracts and straddles.

Stripped bonds and coupons, Stripped bonds or coupons., Stripped Bonds and Coupons

Stripped preferred stock, Stripped Preferred Stock

Suggestions, Comments and suggestions.

T

Tax help, How To Get Tax Help

Tax refund, interest on, Interest on tax refunds.

Tax shelters, Tax Shelters

Tax-exempt income, expenses of, Tax-exempt income.

Tax-exempt interest:

Reporting, Information-reporting requirement., Reporting tax-exempt interest., Information reporting requirement.
State or local government obligations, State or Local Government Obligations
Stripped bonds and coupons, Stripped bonds or coupons., Stripped tax-exempt obligations.

Taxes:

State and local transfer, State and local transfer taxes.
State income, State income taxes.

Taxpayer Advocate, Contacting your Taxpayer Advocate.

Traders in securities, Special Rules for Traders in Securities

Trades:

Insurance, Insurance Policies and Annuities
Investment property for annuity, Trade of investment property for an annuity.
Like-kind, Like-Kind Exchanges, Like-Kind Exchanges
Nontaxable, Property Received in Nontaxable Trades, Nontaxable Trades, Nontaxable trades.
Stock, Corporate Stocks
Taxable, Property Received in Taxable Trades
U.S. Treasury notes or bonds, U.S. Treasury Notes or Bonds

Treasury bills, notes, and bonds, U.S. Treasury Bills, Notes, and Bonds

Trust income received by beneficiary, Beneficiary of an estate or trust.

Trustee's commission, revocable trust, Trustee's commissions for revocable trust.

TTY/TDD information, How To Get Tax Help

U

U.S. savings bonds, U.S. Savings Bonds, U.S. savings bond interest previously reported.
U.S. Treasury bills, notes, and bonds, U.S. Treasury Bills, Notes, and Bonds, U.S. Treasury Notes or Bonds
U.S. Treasury Bills, Notes, and Bonds, U.S. Treasury notes and bonds.
Usurious interest, Usurious interest.

W

Wash sales:

Holding period, Wash sales.
Loss deferral rules, straddles, Coordination of Loss Deferral Rules and Wash Sale Rules
Loss disallowed, Wash Sales

When to report interest income, When To Report Interest Income

Worthless securities, Worthless Securities, Losses on Section 1244 (Small Business) Stock, Worthless securities.